girdles_gone_wild posted:

This J.A. Schumpeter is nifty

yeah, he is.

anyways, i feel really dumb for not thinking of this sooner, but it makes a lot of sense to think of economics as a discourse. its object is the organization of human activity itself ("the economy"). economic statistics/charts/graphs are representations of this discourse.

it follows that the best way to "teach economics" that is worthwhile is just to explain what the verbally expressed concepts refer to. the genius of the orthodoxy here has just been being as obscure as possible and then evading explanation by appeals to "complexity".

so purchasing-power, for instance, is how much a given quantity of money will buy in terms of goods. a decrease in purchasing-power against a standard basket of goods is inflation as measured in indexes like the CPI. both variants of orthodox economic theory operate on the assumption of the quantity theory of money and attention is drawn to government spending to explain inflation. this is despite the fact that private financial institutions also create purchasing-power and there is no such thing as a stable aggregate quantity of a thing called "money".

L. Randall Wray (cited extensively by Graeber in his book): http://www.economonitor.com/lrwray/2012/04/02/krugman-versus-minsky-who-should-you-bank-on-when-it-comes-to-banking/

Look at it this way. You can write an IOU to your neighbor: “I owe you five bucks”. It is your financial liability and your neighbor’s financial asset. Where did it come from? Thin air.

Did you have to get cash first to write the IOU? No. Do you have to have $5 in cash in your pocket to write the IOU? No.

Now, you do have to “redeem” your debt at some point. Your neighbor presents your IOU to you for redemption and you cough up the cash, or you write a check on your bank deposit, or you provide something else of value that is mutually acceptable. When you satisfactorily redeem yourself, your neighbor hands back your IOU and you tear it up.

In this process, you “created money” out of “thin air”; the “money” was your IOU denominated in dollars. (The money you created is destroyed when you repay your debt.)

Now, you might object: but how can that be money? It was just my debt held by my neighbor. It didn’t circulate. The neighbor could not buy anything with it. Yes, that could be true.

On the other hand, it is conceivable that you are well-known and trusted across your entire neighborhood. In that case, the neighbor holding your IOU certainly might be able to pass it in payment for her own IOU to another neighbor (a “third party”). In that case, this other neighbor can present it to you for redemption. Or, your neighbor might hire a local kid to mow the lawn—and then the kid presents it for redemption. So, at least in theory, your IOU could circulate to pay debts or to buy services.

As Minsky always said: anyone can create money; the problem is in getting it accepted.

taking out a loan is "accepting" newly created money.

this brings us to national accounting and GDP. GDP is a flow (quantity measured over a period of time) measurement of aggregate expenditures (GDI is income). this measure seriously came into existence in the 1930's and gained widespread acceptance after WWII, so there's nothing natural or inevitable about it. still, it has a "phantom-ike objectivity" about it: http://www.foreignpolicy.com/articles/2012/04/16/ed_luce_interview?source=Patrick.net&page=full

Well, there are two types of decline. The first is relative economic decline, and I think this should be uncontroversial. Funnily enough, it isn't yet fully uncontroversial, but it should be: namely, that America's share of the global economy is diluting. In 2000, America had about 31 percent of the global economy, so just under a third. And by 2010 it was down to 23.5 percent, just under a quarter. That is a remarkable shift. So relative economic decline shouldn't be something we debate too much because it's happening and it's going to continue to happen. And I think the U.S. share would be likely to fall to a little more than a sixth in the next decade or so, unless there are dramatic changes in the pattern and distribution of global growth.

One of the reasons why I emphasize this is because there's one very accomplished author whom I generally admire, Bob Kagan. His book, The Myth of American Decline, makes the point that America's share has been unchanged for 40 years and unchanged between the turn of the century and now. The facts are wrong. And I picked that up because the president picked it up and essentially cited the core pieces of Kagan's argument in the State of the Union . While it's understandable President Obama wants to refute the idea that he's America's declinist-in-chief -- and it is a line of attack from Mitt Romney -- I do think it means that we're going to have a 2012 election where on both sides, both candidates will start on a false premise: that relative economic decline is simply to be ignored or dismissed. And I'd describe that as a kind of intellectual ostrich position.

a lot of that just comes from the fact that the dollar is still the global reserve currency. other countries have purchasing-power measured in different units (the currency as unit-of-account) domestically and, abstracting from foreign investment, only use dollars (in the form of foreign exchange reserves) to settle trade imbalances. these dollars are obtained by exporting to the US and/or borrowing (such as IMF loans), so it tells us pretty much nothing about what the residents of other countries produce and purchase.

moreover, not all of what is measured in the US GDP has anything to do with production and/or international trade. working that out requires digging through arcane statistics that aren't widely publicized. a lot of it is just financial transactions consisting of moving money around from place to place without ever entering the sphere of production in the form of tangible investment.

a much better depiction of "closed" economies are stock-flow consistent matrices. they look a bit intimidating, but aren't really all that difficult. the textbook on them is out in paperback now (got my copy in the mail the other day): http://www.amazon.com/Monetary-Economics-Integrated-Approach-Production/dp/0230301843/

cleanhands posted:

i read that wray excerpt and the whole 'money = debt' thing kind of clicked for me, thanks

well it's an asset for one party and a liability for another that nets out to 0 over time (unless something goes wrong). so it's a positive quantity and a negative quantity at the same time. the positive quantity tends to get referred to as "savings" while the negative one tends to get ignored.

during a given period of time, your expenses plus your income plus/minus your financial balance from the previous period = 0. if you spend more than you earn, you will be in debt during the next period and if you earn more than you spend, you accumulate "savings" (positive financial balance/"money in the bank") during the next period. this is where we get Kalecki's saying about workers spending what they earn and capitalists earning what they spend (and another one about economics being the science of confusing stocks and flows).

Edited by dm (May 10, 2012 16:10:07)

discipline posted:

cleanhands posted:

i had a look at neo-lf, they do a front page article gimmick there (stupid idea imo, itll never catch on) and theres some good stuff on there imo, take a peek - http://forums.postgarden.org/ipboard/index.php?/page/index.html/_/articles/ypf-oil-nationalized-argentina-no-acepta-condi-r10

yeah it's pretty scummy how statickinetics came to post here for like two days before returning to neo-wddplf with open arms and a great idea about a front page lmao

just to be clear - statickinetics crossposted that in p-garden/wddp well before wddp closed down. good article imo - who cares where it's posted

Finally, the most damning evidence that JPM's World's Biggest Prop DeskTM, elsewhere known as the CIO, has to be dismantled lest it suffer the fate of all other massive prop desks, which promptly blew up in the days after the Lehman failure, is the following:

One public sign that the chief investment office does more than hedge: Its trading risk is on par with that of JPMorgan’s investment bank.
JPMorgan’s annual report for 2011 shows that the CIO stood to lose as much as $57 million on most days of the year. That compares with $58 million for the investment bank, which includes Wall Street’s biggest stock- and bond-trading units.
Another sign: The relationship between the CIO and the investment bank’s sales and trading desks is strained, two former employees said. Employees in the CIO get a smaller share of their trading profits than those in the investment bank, giving Dimon a cost-management incentive to direct more trading through the CIO, one former executive said.
Hence: JPMs "Chief Investment Office" = World's largest prop trading desk. But hey, just repeat "Assymetric Service Initative" ... "Assymetric Service Initative" ... "Assymetric Service Initative" three times ... and it becomes truth.

The Nazis were Keynesians. Hitler's Minister of Economics, Hjalmar Horace Greeley Schacht, was the head of the central bank until 1937. He was a believer in fiat money and government spending, especially spending on public works projects. He believed this would reduce unemployment. He was a shovel-ready kind of guy.

He opposed military spending. He also opposed persecution of the Jews. He lost his position in 1937. He remained in Germany. He spent time in a concentration camp during World War II.

He should have gotten out in 1933. He surely should have gotten out in 1937. But he stayed, hoping for the best. The best eluded him.

The Keynesianism of Nazi Germany was of a special kind: highly centralized. Keynes had written this of the German planning system in the Preface to the 1936 German translation of The General Theory.

"The theory of aggregated production, which is the point of the following book, nevertheless can be much easier adapted to the conditions of a totalitarian state than the theory of production and distribution of a given production put forth under conditions of free competition and a large degree of laissez-faire. This is one of the reasons that justifies the fact that I call my theory a general theory. Since it is based on fewer hypotheses than the orthodox theory, it can accommodate itself all the easier to a wider field of varying conditions."

"Although I have, after all, worked it out with a view to the conditions prevailing in the Anglo-Saxon countries where a large degree of laissez-faire still prevails, nevertheless it remains applicable to situations in which state management is more pronounced. For the theory of psychological laws which bring consumption and saving into relationship with each other, the influence of loan expenditures on prices, and real wages, the role played by the rate of interest - all these basic ideas also remain under such conditions necessary parts of our plan of thought."

Keynes understood that his general theory is in fact a theory of central economic planning. He saw that it would be easier to apply his theory under the Nazi economy than under the free market.

The centralization of power in the hands of politicians, central bankers, and their economic advisors is the characteristic economic feature of our era. It distinguishes our era from the nineteenth century, both in theory and in practice. Keynes understood this, and he railed against the earlier era's economic theory and practices. The earlier era had promoted the international gold standard, free trade, low taxes, and limited government. By 1936, Keynes rejected all of this. He believed in planning by experts like himself.

European critics of the Nazis, such as economists Ludwig von Mises, Wilhelm Röpke, and F. A. Hayek, were hostile to Keynes. They recognized that the Nazis' fiat money, central planning, fiscal deficits, and price controls were all part of a worldwide movement away from the nineteenth century's concept of free markets. The Keynesians demanded the substitution of expert economic planners for the decentralized planning that is characteristic of the free market.

The post-World War II era brought the triumph of Keynesianism in the West. Keynesianism is still dominant in academia and in central banking. Nowhere is this more clear than on the campus of Princeton University. Princeton gave us two representative figures: Ben Bernanke, who is now chairman of the Federal Reserve's Board of Governors, and Paul Krugman, who won the Nobel Prize in 2008 - the year the recession escalated - and who writes a blog for The New York Times. These men are the leading spokesman for Keynesianism in the American intelligentsia.

jools posted:

also this place has like 1000 lurkers whereas they have none, by design. they literally do not want more posters.

They did put in an option to leave comments on the articles, under the assumption that people are actually going to stumble on the site and become interested in it.

Prospero posted:

girdles_gone_wild posted:

European critics of the Nazis, such as economists Ludwig von Mises, Wilhelm Röpke, and F. A. Hayek

didnt those dudes flat out defended fascism when shit got real?

No. Mises and Hayek saw fascism as a dangerous next step to the statism they vehemently opposed. Hayek's "The Road to Serfdom" goes into detail about nazi fascism in particular.

Jerthebear posted:

Prospero posted:

girdles_gone_wild posted:

European critics of the Nazis, such as economists Ludwig von Mises, Wilhelm Röpke, and F. A. Hayek

didnt those dudes flat out defended fascism when shit got real?

No. Mises and Hayek saw fascism as a dangerous next step to the statism they vehemently opposed. Hayek's "The Road to Serfdom" goes into detail about nazi fascism in particular.

not quite in von mises' case. he's a bit more ambivalent due to his absolute vehement hate for socialism:

It cannot be denied that Fascism and similar movements aiming at the establishment of dictatorships are full of the best intentions and that their intervention has, for the moment, saved European civilization. The merit that Fascism has thereby won for itself will live on eternally in history. But though its policy has brought salvation for the moment, it is not of the kind which could promise continued success. Fascism was an emergency makeshift. To view it as something more would be a fatal error.

EmanuelaOrlandi posted:

I can't take anyone's economic / political viewpoints seriously until I know their stance on hot twinks. Anyone got any sources w/r/t Mises' viewpoint on the issue?

read McCaine

Jerthebear posted:

Prospero posted:

girdles_gone_wild posted:

European critics of the Nazis, such as economists Ludwig von Mises, Wilhelm Röpke, and F. A. Hayek

didnt those dudes flat out defended fascism when shit got real?

No. Mises and Hayek saw fascism as a dangerous next step to the statism they vehemently opposed. Hayek's "The Road to Serfdom" goes into detail about nazi fascism in particular.

wow what a funny and interesting gimmick in a forum of 10 people. if you're serious about your gimmick, please explain the cambridge controversy to me, from what I understand it put the nail in the coffin of a non-LTV understanding of economics but the arguments are highly technical and I have a pretty poor understanding of mathematical models in economics. how did neo-classical economics survive (other than pretending nothing happened obviously) and how do austrians even deal with marxist and "neo-ricardian" critiques?